Between the amounts of labor L1 and L2, we know that if the price of labor is constant, then ____.a) the total cost of labor is decreasingb) the amount of output is decreasingc) the MPL is increasing d) the MC of output is increasinge) the MPL is constant **Figure: Total Product**This graph represents the relationship between the total output produced (total output per period) and the number of units of labor used per day (units of labor per day). The horizontal axis (x-axis) indicates the number of labor units, while the vertical axis (y-axis) shows the total output or product resulting from these labor units.Key Points on the Graph:- **Point A:** This point on the curve represents an initial stage where the total product increases at an increasing rate as more labor units (L1) are added. This section of the curve usually illustrates the benefits of specialization and increasing returns to scale.- **Point B:** This point is the peak of the curve, indicating the maximum total product that can be achieved with a given number of labor units (L2). Beyond this point, the total product begins to decrease, demonstrating diminishing returns.- **Curve Shape:** The curve initially rises sharply, reflecting increasing returns, then flattens indicating decreasing returns, and eventually starts to decline past Point B, marking negative returns.This graph is fundamental in understanding the law of diminishing returns, which states that as more of a variable resource (labor) is added to a fixed resource (capital), the additional output produced from each new unit of labor will eventually decline.

The figure indicates the Total Product Curve. The horizontal axis represents the Total labor units…

Between the amounts of labor L1 and L2, we know that if the price of labor is constant, then ____. a) the total cost of labor is decreasing b) the amount of output is decreasing c) the MPL is increasing d) the MC of output is increasing e) the MPL is constant

Between the amounts of labor L1 and L2, we know that if the price of labor is constant, then ____. a) the total cost of labor is decreasing b) the amount of output is decreasing c) the MPL is increasing d) the MC of output is increasing e) the MPL is constant

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.2P

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